Financial Advice for the Sandwich Generation

If you’re between the ages of 35 and 55, you may be feeling a financial pinch from both your growing — or grown — children and your aging parents or in-laws. You may also find yourself under pressure as you try to juggle your work commitments and the expectations from family members for your time and support. As a member of what’s known as the Sandwich Generation, you’re not alone.

Unlike previous generations, in which children left home earlier and more permanently, today kids tend to live at home longer or move out and return, sometimes with their children in tow. And parents tend to live longer, often spending 25 years or more in retirement. If you’re wondering how to keep yourself financially on track in the face of these competing demands, the following strategies may help:

Pay yourself first — Instead of paying your bills and other expenses and then saving what’s left, automatically route a portion of your paycheck to your 401(k), Roth IRA or other retirement savings account and encourage your working children to do the same. This way, you’re regularly investing in your future financial security. Because of the power of compound interest, the sooner your children start this habit, the better their chances of accruing wealth.

Talk openly about finances — Discuss the basic tenets of sound money management with your children to help them develop good saving and spending habits at an early age. This includes helping them understand the role cash reserves, insurance protection, fixed investments and equity investments play in their financial strategy. On the flip side, it’s equally important to talk with your parents about their plan for meeting their financial obligations in the years ahead. This includes knowing what plans they have if they become ill or incapacitated.

Discuss long-term-care insurance — One of the greatest challenges when it comes to planning for retirement is trying to predict health care expenses. In-home health care costs or a lengthy nursing home stay can wreck havoc on a family’s finances. If your parents don’t have long-term-care insurance, they might want to look into it.

Make sure financial and legal documents are up to date — Whether it’s you, your parents or your children, it’s important to determine whether you’ll need a durable power of attorney, a health care proxy, a living will, and a last will and testament. It’s also key to review and update beneficiary designations on investments and insurance policies because they could trump what’s in a will. In addition, it’s wise to keep a list of your financial accounts and passwords — and know where your parents and children keep theirs — in case one of you needs to step in for another. And don’t forget to keep these documents in a safe place.

Explore resources to help offset costs — If your children are attending college, research the scholarship opportunities or work-study programs available to them. Also, find out whether your parents qualify for any federal, state or local benefits. This knowledge can help all of you make better and more informed decisions about budgeting, school choices, loan options, long-term-care options and other financial choices.

Set limits — Although your career may be reaching its peak and you may be making more money than ever, those dollars aren’t necessarily up for grabs. Be clear with your children and parents about how much financial support you are realistically able to provide. If you choose to give them money, be clear whether it’s a loan that needs to be repaid or a gift that does not. When lending money, document the conditions of the loan in writing, and have both parties sign and date the agreement so that there are no misunderstandings.

For help understanding the potential pitfalls of the Sandwich Generation and how to protect yourself and those who matter most to you against them, consult a reputable financial adviser. An adviser can help you create a financial strategy that makes sense for your situation.

Allen Shpigel is a financial adviser and chartered retirement planning counselor with Ameriprise Financial Services in Atlanta. He specializes in fee-based financial planning and asset management strategies and has been in practice for 12 years.

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